Towards Strategic Sustainability: the barriers and ...

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Towards Strategic Sustainability: the barriers and enablers of supplier involvement in product stewardship and clean technology strategies

ABSTRACT

Many of today’s firms see sustainability as an exercise in reducing costs and

minimizing risk. These organizations use pollution control or prevention techniques to limit

the amount of waste in products or processes. By drawing on the Natural Resource Based

View this paper calls for a more strategic approach to sustainability; one which moves

beyond pollution prevention towards product stewardship and clean technology strategies.

Specifically, the paper argues that suppliers should be involved in embedding product

stewardship and clean technology strategies in a firm’s new product development process to

achieve a competitive advantage. To make this argument, the paper uses an in-depth case

study of a high technology firm in the aerospace industry. The case study extends past the

boundaries of the firm to include an examination of a supplier and customer, termed a triadic

case study design. A triangulated data collection approach is used including forty-two semi-

structured interviews, eight focus groups and secondary data. A theoretical contribution is

made by determining how technological uncertainty affects supplier involvement in

embedding product stewardship and clean technology strategies in new product development

efforts. Practically, the paper advances a matrix to assist managers in deciding on appropriate

types of supplier relationships when pursing a product stewardship or clean technology

strategy.

Keywords:

Sustainability; Supply Chain Management; New Product Development

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1. Introduction

Over the past few decades there has been increasing stakeholder pressure on organisations

to improve their sustainable performance. These stakeholders make little distinction between

a firm’s internal operation and its supply base. Much of the literature on “Green” and

“Sustainable” Supply Chain Management examines how firms implement pollution

prevention techniques to minimize waste resulting in reduced costs rather than relying on

expensive "end-of-pipe" pollution-control technology (Hart, 1995) i.e. short-term tactical as

opposed to more long-term strategic investment decisions. This view is supported by a

variety of studies; Klassen and Whybark (1999) show how a greater emphasis on pollution

prevention technologies improves cost, delivery, flexibility, and environmental performance.

Similarly, Christmann (2000) states the early use of pollution prevention technologies

provides a cost advantage relative to competitors. Aragon-Correa and Sharma (2003) explain

that proactive pollution prevention strategies enable an organization to align itself with

changes in the business environment and lead to lower costs. Seuring and Muller’s (2008)

sustainable supply chain management framework includes: 1) stakeholder pressures; 2)

supplier management for risks and performance and; 3) supply chain management for

sustainable products. Carter and Rogers (2008) focus instead on organizational culture,

transparency, and risk management. While no doubt informative this body of literature

demonstrates a clear focus on how firms use sustainability as an exercise in a short-term cost

and risk reduction rather than a sustainable strategic long-term focus.

The Natural Resource Based View (NRBV) argues firms need to move beyond the cost

minimization focus of pollution prevention towards a more strategic approach to

sustainability using product stewardship and clean technology strategies (Hart, 1995; 1997).

Product stewardship strategies incorporate the views of external stakeholders in to product

design and development to minimize pollution and waste over a products entire lifecycle.

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Clean technology strategies call for more radical technologies that have the potential to

revolutionize entire industries (Hart, 1997; Hart and Dowell, 2011). Hart and Dowell (2011)

recently reported a robust body of literature exploring pollution prevention techniques but

much less attention paid to how product stewardship and clean technology strategies could be

employed to realise sustainable competitive advantage; this development was the key

argument of NRBV.

Within the supply chain literature there is a growing body of work on supplier involvement in

new product development (SINPD). Recently this literature has segregated supplier

involvement into four levels of engagement including: no involvement, “white box”

involvement where the supplier consults informally on design, “grey box” involvement where

suppliers collaborate on design and development and finally “black box” involvement where

the supplier is responsible for the design and development of entire components or

subassemblies (see Petersen et al., 2005; Koufteros et al., 2007). Although this literature does

stress the importance of involving suppliers in NPD efforts it focuses on the economic

benefits paying limited attention to how suppliers can drive environmental performance

improvements in the NPD process through strategies such as product stewardship and clean

technology development.

This paper aims to fill this gap by posing the following research question: “how can suppliers

help firms embed product stewardship and clean technology strategies in the new product

development cycle?” To address this question we adopt an in-depth case study of a high

technology firm in the aerospace sector. The case study extends past the boundaries of the

firm to include a supplier and customer, termed a triadic case study design. This format

provides an understanding of the role of different actors in helping or hindering the

embedding of product stewardship and clean technology strategies in the NPD cycle.

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The paper is divided into five sections. Section one is a literature review focusing on the use

of NRBV and how SINPD can lead to the adoption of product stewardship and clean

technology development approaches. Section two provides an overview of the research

method including data collection and analysis techniques. The third section presents the

findings from the case study including the enablers and inhibitors of supplier involvement in

product stewardship and clean technology strategies. Section four provides a discussion of

the findings and advances a model to assist mangers when deciding on the appropriate type of

supplier relationship when pursing product stewardship and clean technology strategies. The

final section discusses the theoretical and managerial implications of the study, the paper’s

limitations and future avenues of research.

2. Literature Review

2.1 The Natural Resource Based View and Competitive Advantage

The NRBV first espoused by Hart (1995) debates the inevitability of business being

constrained by and dependent upon nature and suggests that future strategies should facilitate

environmentally sustainable economic activities. The NRBV outlines three environmental

capabilities that firms can develop to achieve competitive advantage: pollution prevention,

product stewardship and clean technologies. Pollution prevention is considered a capability

because its decentralized and tacit nature makes it difficult to observe in practice (causally

ambiguous) and therefore hard to imitate (Hart, 1995; Dierickx and Cool, 1989; Lippman and

Rumelt, 1982, Peteraf, 1993). While pollution prevention focuses on new capability building

in a firm’s internal operations, product stewardship addresses every activity of the supply

chain from raw material sourcing, production and distribution to disposal or reuse. Product

stewardship qualifies as a capability because it involves fluid communication across

functions and organizational boundaries making it socially complex and therefore hard to

imitate and substitute (Hart, 1995). Clean technologies reduce material and energy

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consumption by utilizing technological advancements that provide for human needs without

straining the planet’s resources (Hart and Dowell, 2011). Clean technologies become a

strategically important capability if they are distinct to the firm and difficult for the

competition to imitate.

2.2 The role of technological uncertainty in Pollution Prevention, Product Stewardship and

Clean Technology Strategies

Hart (1997) made an explicit distinction between “greening” strategies (pollution

prevention and product stewardship), which focus on incremental improvements to today’s

products and processes, and “beyond greening” strategies (clean technology) which are more

radical in nature. “Greening” strategies foster continuous improvement rather than

reinvention or fundamental change to technologies (Rooney, 1993; Hart and Milstein, 1999).

Examples of pollution prevention techniques include changes in packaging to reduce waste

and changes to manufacturing processes to minimize harmful effluents. As the firm is

working from an established base of knowledge and expertise any incremental change to the

new product tends to mean relatively low levels of technological uncertainty are present.

Product stewardship implies an organizational ability to not only coordinate functional

groups within the firm, but also integrates the perspectives of key external stakeholders into

decisions on product design and development (Welford, 1993). By involving key external

stakeholders, such as suppliers, in NPD efforts the firm is able to minimize uncertainty by

extending visibility up the supply chain. Close collaboration with suppliers allows the firm to

proactively spot potential environmental issues in raw material sourcing, manufacturing or

distribution. Furthermore, suppliers can bring in-depth knowledge and expertise of new

environmentally friendly technologies and processes. Therefore, by drawing on supplier

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insight firms are able to handle more moderate degrees of technological uncertainty during

the development of new products.

While pollution prevention and product stewardship tend to favour incremental change, clean

technologies require longer term re-thinking of industrial products and processes

necessitating more radical advances in technology (Irwin and Hopper, 1992). Technological

uncertainty is likely to have a significant effect on the development of clean technology

capabilities because commercialization involves dealing with information that is uncertain,

constantly evolving, and dynamically complex (Aragon-Correa & Sharma, 2003; Hart &

Sharma, 2004; Hart and Dowell, 2011). For firms, this entails the organizational capacity to

protect and nurture disruptive or leapfrog clean technologies, including those technologies

that may eventually cannibalize parts of the existing core business (Hart and Dowell, 2011).

The radical nature of clean technologies suggests an inherently high level of technological

uncertainty being present during NPD projects.

2.3 Supplier Involvement in New Product Development

The SI-NPD literature has reached different and sometimes contradictory findings around

the importance of involving suppliers in the NPD process. Several studies have found early

supplier involvement, often at the design stage, to be a critical factor in improved product

performance (Bidault et al., 1998; Wasti and Liker, 1997; Swink, 1999). Ragatz et al. (1997)

provided evidence that involving suppliers extensively and early reduced costs, improved

quality and sped up time to market of new products. Similarly, Liker and Choi, (2004)

indicated that early supplier involvement provided firms with accelerated time-to-market,

improvements in innovativeness, reduced production costs, and enhanced quality. In the mid

2000’s, the SI-NPD literature moved in a new direction, categorizing supplier involvement

along a spectrum of engagement ranging from no involvement, to “white box”, “grey box”

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and finally “black box” integration (Petersen et al., 2005). Koufteros et al. (2007) found the

effects of black-box integration on product innovation to be statistically non-significant,

whilst the direct effect of supplier grey-box integration to be positive and statistically

significant. This demonstrates that different degrees of supplier involvement can affect the

outcomes of NPD projects. The aforementioned literature generally espouses the positive

benefits of Supplier involvement in NPD projects. We begin to see greater disagreement

when authors account for the role of technological uncertainty in NPD projects.

2.4 SI-NPD and the role of technological uncertainty

During the late 1990’s and 2000’s several authors began to include technological uncertainty

into their analysis of NPD projects. Petersen et al. (2003) and Ragatz et al. (2002) suggested

that supplier representation on NPD development teams is critical, especially in situations of

high technological uncertainty. Song and Benedetto (2008) found that increased asset specific

investments heightened the level of supplier involvement in the development of radical

technologies which, in turn increased new product performance. In contrast, Eisenhardt and

Tabrizi (1995) suggested that less supplier involvement might be necessary under conditions

of high technological uncertainty. They found that technologically predictable projects

showed positive effects of supplier involvement on development time however less

predictable projects showed no significant effect of supplier involvement. Swink (1999)

found supplier influence to be strongly associated with improved manufacturability but the

correlation diminished in cases of high product “newness” or high technological uncertainty.

Similarly, Primo and Amundson (2002) found that existing suppliers might be less important

than new suppliers in conditions of high technological uncertainty. Finally, Phillips et al.

(2006) suggest that involving existing direct suppliers in radical technology development

may prove redundant as new complementary capabilities and technologies from outside the

existing supply chain are required. As technological uncertainty appears to be such an

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influential variable when involving suppliers in NPD projects it is considered as part of this

study.

3. Research Method

This paper uses an in-depth case study focussing on a high technology firm in the

aerospace sector. The case study format was chosen because it offers in-depth data gathering

and analysis. Using one case allows for the control of external effects. This type of industry

is notoriously secret therefore it would have been very difficult to work with competitors and

still have full access to deep ‘dive’ data. This method is supported by the literature. Voss et

al. (2002) argue that case research has consistently been one of the most powerful research

methods in Operations Management. Dyer and Wilkins (1991) argue that single case studies

enable the researcher to capture in much more detail the context within which the phenomena

under study occurs. Yin (2009) also supports the use of a single case design in certain

situations including uniqueness and longitudinal research, these are both important criteria

relating to this study.

3.1 Unit of Analysis

This paper reports on three technology development projects each representing one of the

three environmental strategies of the NRBV: pollution prevention, product stewardship and

clean technologies. The first technology project is the development of a material called

Titanium Aluminide (TiAl) which is a combination of titanium and aluminium. This material

has been incrementally developed by the case study company since the early 1990’s. The

lengthy development time and existing body of knowledge around the base metals means the

TiAl project has relatively low levels of technological uncertainty in the eyes of the firm.

TiAl is part of a pollution prevention strategy because it replaces a nickel alloy which

includes rhenium, a rare-earth element, to increase heat resistance. Furthermore, nickel is a

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carcinogen making it potentially harmful to engineers and mechanics during installation and

disposal.

The case company as part of a product stewardship strategy is developing the second

technology project, carbon composites. The case company has formed a joint venture to

develop this material and the supplier has been involved since the design stage. The case

company has benefited from the expertise and knowledge this supplier has accrued when

developing carbon composites in other industries. By drawing on the supplier’s experience

the case company has been able to reduce uncertainty leading to relatively moderate degrees

of technological uncertainty. Carbon composites provide environmental benefits because they

are a lightweight alternative to the current material used and can remove up to eight hundred

pounds of weight from the company’s product. Lighter weight mean less fuel is burned and in

turn less Carbon dioxide and nitric oxide emitted.

The third project, additive layer manufacturing, is being developed by the company as part of

a clean technology strategy. This technology has also been developed in the supply chain,

with the case company primarily relying on suppliers to mature the technology. It is

considered a clean technology because typical manufacturing techniques take a large chunk

of material and machine away up to 90% creating a great deal of waste during the process.

ALM, on the hand, uses laser technology on a bed of metal powder to create layer after layer

of the component. In the end a component is “3-D printed” into existence reducing waste to

around 5%. Finally, ALM is seen as a clean technology because it has the potential to disrupt

the entire manufacturing industry and is considered by many to be “game-changing”

technology leading to relatively high levels of technological uncertainty.

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3.2 Triadic Case Study Design

The case study extends past the boundaries of the case company to include an upstream

supplier and downstream customer. In so doing, the case study format becomes a triadic, or

three-way, design. A triad is a network arrangement that allows the researcher to study how a

node affects another node (e.g. A affecting B or C) and a link affects another link (e.g. AB

affecting AC or BC) (Choi and Wu, 2009). The triadic case design allows the researcher to

understand which actors are driving, supporting or hindering the embedding of product

stewardship and clean technology strategies in the NPD process. The supplier is a small

additive manufacturing company comprised of fifty employees. The paper examines how the

supplier and case company have worked together over the past five years on the development

of the ALM technology. The customer is a large multinational company that is interested in

purchasing both carbon composite and additive manufactured components from the case

company. As titanium aluminide was developed internally at the case study company it was

only discussed with case company interviewees and focus group members

3.2 Data Collection Methods

To improve reliability this paper uses a triangulation data collection method including semi-

structured interviews, focus groups and secondary data as advocated by Yin (2009). A total

of 42 semi-structured interviews were conducted at the case study company, the supplier and

customer. In addition, eight focus groups were conducted to limit confirmation bias by

providing a check on the interview findings and ensuring interviewees were not telling the

researchers “what they want to hear”. Secondary objective data provided a further check

allowing the researchers to confirm or reject statements given during interviews and focus

groups. This data included company procedures and protocols, supplier contracts, supplier

management document and strategy documents. Data collection stopped when a point of

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theoretical saturation was reached, or when additional data did not provide new information

or understanding (Eisenhardt, 1989; Lee, 1999).

3.3 Sampling Technique

A snowball sampling technique to select each interviewee was used. This sampling method

was selected due to the highly sensitive and confidential nature of the data and the reluctance

of the case company employees, suppliers and customers to take part when unfamiliar with

the researcher and the research project (Taylor and Bogdan, 1998). Snowball sampling

allowed the researchers to use the initial contact as a gateway to gain access and to inform

subsequent interviewees of the nature of the project and provide reassurance of the steps

taken to maintain confidentiality.

3.4 Data Analysis Techniques

Data was analysed using thematic analysis techniques. With thematic analysis the researcher

produces a list of themes and codes from the textual data (King, 2004). NVIVO 10 software

was used to code the interview transcripts, focus group notes and secondary documentation.

Using hierarchical coding groups of similar codes were clustered together to produce more

general higher order codes, or themes. Themes provide a good overview of the general

direction of the interview, while detailed lower order codes allow for a very fine distinction to

be made within the case (King, 2004).

4 Findings

After rigorous analysis of the data it was apparent that two overarching themes

emerged we label these: Barriers and Enablers, because they appear to be either enhancing or

restricting the firm’s ability to move towards the high sustainability goals of product

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stewardship and/or clean technology. Under the Barriers category sit the sub-themes of:

technological uncertainty, cost minimization using sustainability, supplier relationships and

issues concerning intellectual property. Under the Enablers category are the sub-themes of:

strategic approach to sustainability, supplier collaboration and intellectual property sharing.

We will now discuss each of these main and sub-themes in turn.

4.1 Barriers to embedding product stewardship and clean technology strategies in the

NPD cycle

4.1.1 – Technological Uncertainty

Technological uncertainty emerged as the first barrier to embedding product stewardship and

clean technology strategies in the NPD cycle. The clean technology project, additive layer

manufacturing, was found to be the most adversely affected by technological uncertainty. The

product stewardship project, carbon composites, was less affected but some impact was

evident. Technological uncertainty was not found to have a noticeable effect on the

development of titanium aluminide. Table 1 provides a summary of how technological

uncertainty was seen by interviewees to affect the ALM and carbon composite projects.

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Insert Table 1 About Here

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ALM was seen by a majority of interviewees to be a game-changing technology due to its

ability to open up a new design space, utilize novel materials and revolutionize the

manufacture of components. Interviewees explained the case company developed ALM in the

supply chain because it had insufficient in-house knowledge or capabilities in the technology.

So, despite ALM being seen as a strategically important technology to the company, it still

felt external partners were better positioned to mature the technology. This suggests that

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uncertainty around the technology was a primary motivating factor in outsourcing

development. The novelty of ALM to the aerospace industry also meant few suppliers existed

in the market with sufficient knowledge, capacity and capabilities to develop components to

the high specification required by the case company. Although many suppliers had developed

prototypes and components for other industries such as medical and automotive few had

experience delivering to the stringent requirements of the aerospace industry. One

interviewee explains: “the supplier maturity overall was very very low. And the knowledge to

understand how it applies to aerospace isn’t there….these bureau suppliers have been born

out of rapid prototyping making parts for all sorts of different industries….that aerospace

rigour is very very different”. Another four interviewees stated supplier knowledge around

ALM is very limited which creates uncertainty as single points of failure exist in the supply

chain: “knowledge and maturity is in pockets and enclaves. You think about a business

continuity point of view, if you have a single point of knowledge and a single point of

potential failure, you haven’t got business continuity.”

High degrees of technological uncertainty also affected the extended supply chain of

machines and powders. Again, the novelty of the technology to the aerospace industry and

rigorous requirements of the case company meant few raw material and machine providers

exist which could meet specifications. As one interviewee explains: “The whole supply chain

doesn’t exist at the moment…. there’s issues around powder cost and clearly, you need to

have machines that meet the rate and the capability that you need. And at the moment there

aren’t many places you’d go to say ‘could you start making me a thousand components in a

year?’ Where would you go?”

Another interesting finding was that the competition was very aggressive in purchasing

promising ALM suppliers in the early stages of development. One such example is when a

large multi-national purchased an ALM machine provider just as the supplier began to

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actively pursue the additive manufacture of metal components. This gave the competitor an

edge over the case company in terms of capacity whilst blocking the case company from a

significant source of ALM machines. One focus group member felt the competition were

quick to acquire suppliers and this activity was often unforeseen by the case company.

Technological uncertainty also played an important role in the development of carbon

composites. The case company decided to develop the technology using a joint venture with a

supplier who had expertise in the material from different sectors. Again, even though carbon

composites were seen to be a strategically important technology, the case study company

sought to reduce technological uncertainty by tapping the experience of its supply base. Four

of the interviewees felt the joint venture sped up carbon composite development in the early

stages. One interviewee explained why: The joint venture has its advantages because you’re

bringing ongoing knowledge and expertise from [The supplier] in to that JV. This view was

further supported by another interviewee who stressed how this collaboration allowed the

knowledge and experience of the supplier to spill over to the case company: “I think in the JV

we had more expertise at our disposal if we wanted it, people who …. worked for [the

supplier] who were really experienced, long-term guys who could drop-in and help sort out a

problem”.

4.1.2 – A cost minimization approach to sustainability

A cost minimization approach to sustainability emerged as the second barrier to embedding

product stewardship and clean technology strategies in the NPD cycle. Twenty-eight

interviewees believed cost reduction to be the main driver of environmental performance

improvements in new technologies and/or products (see table 2). Interviewees explained how

the case company constantly strove to improve fuel consumption of the product as this is the

primary cost incurred by customers. Several interviewees stated that by improving fuel burn

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the additional environmental benefits of reduced carbon dioxide and nitric oxide emissions

were also realized. This cost minimization approach is explained by one interviewee: “You

can boil it down to being about how much fuel we burn. So ultimately, a load of our research

is about getting our product more efficient and burning less fuel. That can be either because

it's lighter, it's a better architecture, the components…. and that of course has a pound note

and economic benefit for the airlines, so ultimately a big chunk of what we're doing in R&T is

fundamentally about fuel burn and therefore the environment” Legislation was cited by

twenty-five interviewees alongside cost as playing an important role in the case company’s

push for environmental performance improvements, but with cost often being the primary

driver.

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Customer interviewees also saw cost reduction as the primary driver behind pursuing

environmental performance improvements in new technologies. One customer interviewee

explains how legislation is an important but secondary driver to cost minimization at his

company: “I think the main driver is probably cost….we comply with legislation as it comes

out, but…. the main driver for us in terms of production is whether we can actually produce

something cheaper and faster with a quicker turn-around”.

Similarly, the supplier interviewees saw cost as the main factor that drove sustainability at

their company. One supplier interviewee summarizes the responses given: “It [sustainability]

is driven by cost, customer, legislation. So the customer may be driven first by legislation.

They are told to reduce emissions on the products of their cars or aircraft or whatever. Our

customer, they’re not driven by some altruistic desire to reduce emissions. They’re driven by

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the fact that EU legislation is put in…Of course, from a marketing point of view they will then

say ‘yes, we’re driven by environmental factors”.

4.1.3 Supplier Relationships

The case company’s approach to supplier relationships emerged as the third barrier.

Seven interviewees felt the case study company lacked collaborative supplier relationships, in

particular with suppliers of strategic components or technologies (see table 3). One focus

group member explained the company primarily has make to print (white box) suppliers and

some design-make (black box) suppliers. However, he stated there were very few instances of

formalized “grey box” supplier collaborations.

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One interviewee explained how collaborative relationships are very limited in the company

due to cost pressures: “The partners you work with, they've got to make their crust as well.

They're trying to maximise their margin, we're trying to maximise our margin. It's just

become a tug-of-war. On all our supply chain, we're on a major drive to push cost

down….and the SMEs are no different from anybody else really. We're being pushed by our

customers, the competitive climate is tight. We've got to keep driving cost down”

As part of secondary data collection the researchers reviewed the agreement in place between

the case company and the supplier case company. Within the agreement it states that: “The

Parties shall jointly pursue cost reduction opportunities for the duration of this Agreement

and will reflect the achievements of such opportunities in price reductions to the case

company”. The researchers also reviewed the generic supplier agreement template which

states: “The Supplier will, at all times during the Term, conduct cost reduction activities. The

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case company may deploy its personnel to work with the Supplier on cost reduction activities

and the Supplier agrees to fully engage and cooperate to develop and implement cost

reduction activities. The output of all such cost reduction activities will be reflected in a

reduced price for the Deliverables”. This shows how the case company pursues cost

reductions across the board regardless of whether the supplier is providing a strategically

important product or a generic commodity.

One interviewee explains how purchasing tends to put cost reduction pressures on its supply

base regardless of the strategic importance of the component. “There are a number of

conferences I’ve been to where all the suppliers are told ‘you’ve done a great job on doing

this, but we now need you to go and take 10%, 5% cost out of your product’ and it was just a

flat requirement… rather than…working with them and saying ‘well, how together can we

develop a lower cost part?... God, it’s frustrating sometimes when you see that happening”.

Two interviewees stated these cost pressures mean suppliers have little profit left to reinvest

in Research and Development. One interviewee explains the difficulty this creates: “a

supplier will think ‘why should I bother developing anything for [the case company] when

you’re actually just going to screw me on price and I’m never going to get that investment

back?’ The other thing is, if you are taking margin away from suppliers, their ability to invest

in to R&D is obviously reduced. And that’s a difficult balance because obviously, we need to

make sure that our supply chain’s competitive, but at the same time we’ve got to recognise

that they need money to invest, and squaring that circle is sometimes very difficult”.

Another issue as seen by nine interviewees was that suppliers were not involved early enough

in the NPD process. One interviewee explains this view: “I don't think we're good at

leveraging our supply chain in terms of new technology, partly because we leave it too late.

So the design is pretty much fixed before we start earnestly talking to suppliers”. One focus

group member explained the case company tended to give detailed instruction of product

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design and the supplier had to adhere to this specification, however little help was given if the

supply couldn’t meet these stringent guidelines. Finally, one interviewee felt the case

company was reluctant to commit to a longer term spend with suppliers. He explains the

issues this creates: [The case company] are very good at saying ‘well, we’re not

guaranteeing you anything. We’re just looking and we’d like three different suppliers to do

this and we’d like options and we’d like to use the cheapest. But a supplier, would probably

say, ‘well, there’s non-guaranteed revenue here. I’m not going to spend all of my own R&T

[Research and Technology] money developing something you want where I might not get

anything back for it’.

4.1.4 Intellectual Property Protection

Ownership of intellectual property emerged as a significant barrier to the involvement

of suppliers in product stewardship and clean technology strategies. Seventeen interviewees

highlighted IP ownership as creating issues in supplier relationship and the longer term

development of the technology (see table 4). Seven interviewees felt tension arose because

the case company wants to own all foreground IP, which is all the newly created IP generated

between the two parties during the NPD project. Interviewees explained the case company is

trying to maintain “executable choice” which means the case company is not tied to one

particular supplier during the development and commercialisation of the technology.

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In fact, one interviewee explained that suppliers were not involved early in the NPD process

because of the issue of IP ownership: “That is something I think we're very weak on, we're

not so good at bringing suppliers early... we get tied up in this IP issue, we don't know how to

bring them in to create joint IP…it's a balance, as soon as you bring a supplier in, the more

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learning you get earlier, which is good, but the more you constrain yourself to lock yourself

to one supplier, which may hurt you later. So it's managing that trade-off, and we tend to

default with 'okay, we won't bring them in because of those risks'.

During secondary data analysis the researchers reviewed the agreement in place between the

case company and the supplier case company. This agreement stages that “All right and title

in and to any and all Foreground IP will vest in [the case company], and the Supplier hereby

assigns absolutely with full title guarantee the Foreground IP and shall where required

procure the assignment of the Foreground IP to [the case company]” Interestingly, a supplier

interviewee was quick to point out his company would not enter into any future contractual

agreements where the case company owned all foreground IP. He explains: “We have signed

IP agreements already, but I think where there is a real risk with the IP side of things… on

the one hand, to be too lax from [the case company’s] point of view and end up with us

owning IP that stops them from doing something. On the other hand, by being too tight with

it, I’ll end up not signing the agreement because, whatever we do, [the case company] owns

it. I’m not going to sign that”.

The next section draws on the opinions of interviewees and focus group members to suggest

steps the case company can take to smooth the process of supplier involvement in embedding

product stewardship and clean technology strategies in the NPD cycle.

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4.2 Enablers of supplier involvement in product stewardship and clean technology

strategies

4.2.1 Strategic Approach to Sustainability

Although cost and legislation were seen as the primary drivers of sustainability at the

case company, ten interviewees said the customer’s sustainability agenda was gaining

importance (see table 5 below). These opinions suggest the case company is beginning to

move past cost reduction and compliance towards seeing sustainability as a way to secure

new business and achieve competitive advantage. One senior supply chain interviewee

explained how sustainability is rising up the agenda for their airframe customers: “We've

actually just been with one customer last week… who are really making a very strong play on

sustainability for their products and will be requiring all their suppliers to be very very clear

about the sustainability of their products down to a very low level of detail, so that's

becoming all the more important. It will flow through to suppliers. Our customer…they're

flowing it down to us and they will require us to demonstrate our supply chain”.

------------------------------------------


--------------------------------------------

Another nine interviewees explained how the strategy formulation process at the focal firm

has changed over the past three years to become much more customer focused. One

interviewee sums up the situation: “In the past, we'd probably be more 'technology could

deliver us this – let's do it!' Now we're much more, right, what does the market need?' to pull

the technology through rather than push it. Looking over a sort of twenty year period, what

are they going to be requiring? Therefore, what capabilities do we need to meet those

requirements? Therefore, what technologies do we need to meet those capabilities that then

meet those requirements? Seven interviewees felt the competition was driving the focal firm

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to be more sustainable. One interviewee explains the competitive environment currently and

how the firm can use sustainability as an order-winner and tool to achieve competitive

advantage: “the competitive environment we live in forces us to push pretty hard on all of

those environmental requirements because they are differentiators. NOx, carbon monoxide,

hydrocarbons, smoke, etcetera. If we are failing to match our competitors in any significant

sense in any of those then we’re going to struggle and lose business. So I think the

marketplace actually keeps us pretty focussed as well”.

In terms of product stewardship, one respondent explained how the case company is now

considering the whole-life cycle of the product during design: “We visit the whole life-

cycle…. we look at how we dispose of products. Effectively at the design stage, you're dealing

much more with the building blocks. The commodity strategies will envisage how we reuse

material, so we revert the raw material from manufacturing shops, we revert the material

from end of use. So at the product level it is not obvious, but if you drill down in deeper

levels, in terms of the commodity strategy, you should see the sustainability element coming

in to that level”. Another employee explained how end of life is growing in importance

during product design: “it's growing. When I was designing components, it was many years

ago and it was not as mature as we are now…the whole designing for manufacture,

designing for repair, those are things that have now happened to ensure that you're not

creating a wasteful process further down the line and that the components are possible to

repair, rather than being thrown away.”

Seventeen interviewees expressed concern that the case study company’s senior management

team did not maintain focus on strategic technologies, materials or components in the early

stages of development. This finding was found to be particularly true for ALM, carbon

composites and Titanium Aluminide. Lack of focus meant these technologies were started,

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stopped and re-started a number of times delaying overall development times. In realization

of this fact, the executive team implemented what it calls its “top eleven” technologies in

2013. These are the case company’s key technologies seen as being critical to achieving and

sustaining competitive advantage. ALM, Carbon Composites and Titanium Aluminide are

three of the eleven technologies. Several interviewees pointed out that once these three

technologies were nominated as top 11 technologies their rate of development sped up

dramatically. Six interviewees explained that the introduction of integrated project teams

(IPTs), comprised of a technology champion and dedicated experts from various parts of the

business, have also been critical in increasing the pace of development of the three

technologies. One supplier interviewee explained the change that occurred when the

Integrated Project Team was put in place for ALM: “Once they came on-board and we

started having that dialogue, it kind of went backwards and then got momentum forwards

very very quickly. they’ve come up with some good documentation. What the strategy is, how

it fits together, it now gives them direction …so I think it’s been really worthwhile from their

point of view”

4.2.2 Supplier Collaboration

Both the case company and supplier interviewees discussed several initiatives that

could be pursued to better enable supplier involvement in product stewardship and clean

technology (see table 6)

------------------------------------------


--------------------------------------------

Since 2013, the case company has recognized the importance of moving towards more

collaborative supplier relationships. A Supply Chain Collaboration Manager has recently

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been appointed to improve relationships with strategic suppliers. This individual explains the

shift in company culture that is currently taking place: “It has really put a stake in the ground

to our top 135 suppliers that we want to listen, we want to understand and work together

collaboratively, rather than the, ‘you’ll do as I say and by the way, we want 5% cost down.

So trying to say, how can we work together to get cost out? But also, how can we work

together to innovate? So that’s really been a sea-change, and I think that’s sort of linked to

our culture change that we’re going through at [the company] as well”.

One interviewee felt that supplier collaboration could be improved through investing in the

capability development of suppliers of strategically important technologies such as ALM: “if

you look at additive layer, you've got suppliers who understand the technology but who

haven't yet really built a viable commercial vehicle for the exploitation of that. Sometimes I

think that's where we could do a little bit more to help, particularly in real novel

technologies, I think if we could get better collaboration with ground-breaking small

companies and support them and get them working and help them grow…I think there's a

win-win there”.

Another interviewee explained how the cost reduction pressures applied across the supply

base can be counterproductive. He outlined the steps he took to collaborate with suppliers in a

joint cost savings initiative: “[the project] I was involved in is not so much technology-

driven but more, how do we get cost down and how do we get cycle time reduction? And we

came up with ideas, suppliers came up with loads of ideas and we probably implemented

about 60-70% and it drove out huge swathes of cost and lead time. Sometimes these things

don’t work because [the case company] is not prepared to share anything back in terms of

benefit. We want to take all the benefit. We go for a price reduction typically, rather than

margin retention by both parties”. One focus group member believed the emphasis should be

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on intelligent research and development where the company looks at the end game of the

technology and strategic supplier are exempt from cost reduction targets.

Two interviewees stressed the need to create a longer term spend that suppliers can rely on.

Using an example from his past experience one interviewee explains how this process could

work in practice “ What we were trying to do here was a two-way approach, they were trying

to tell us a bit more about the capabilities of the technology, what the roadmap for

development of it was. We were then trying to match that to a portfolio of parts that we could

make using that technology. That then does a number of things. It creates a spend that we

could start to say 'is this going to be a significant technology for the company or not?' and

then we can start to align resource to developing it…we will open up a market of... forty

million a year that you [the supplier] then play in…you have to follow through in terms of

what you say you're going to do, otherwise you get the supplier to invest with no work

coming”.

A supplier interview explained that with longer term guarantees the supplier could secure

financial backing to invest in developing their technological capabilities: “if we get some

warning, and significant commitment, in other words some sort of cast-iron guarantees that

we’re going to get the work, then sure, we can change the company to match. I’ll move an

awful lot of things around to make sure that we can meet a demand profile. And if we can be

even more secure in terms of a medium- to long-term profile, that we can work closely with

[the case company] on, then that would enable me to multiply the capacity by a factor of 5 or

10 within a short space of time….I’ve got no problem with it but I’m not going to do it just on

the off-chance that something might happen”.

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Two supplier interviewees stressed collaboration should start during design and stated the

supplier is willing to provide training courses to engineers and designers at the case company.

One supplier interviewee explained the new direction that the supplier and case company

were moving in: “Currently, to a large extent they come to us with a design and we

manufacture it….we are working on a project now where the initial thing now is that we

manufacture to a specific design, but they will then want us to look at how we can optimise

that design for the process ….the idea is to do a like-for-like component and then look at how

we can optimise it... And with that, we were going to talk to designers directly…I think, the

best way for [the case company] to move forward is to do like for like and prove that it will

outperform what they‘re currently using. Until they’ve done that they can’t move forward”.

4.2.3 Intellectual Property Sharing

Thirteen interviewees stressed the need for a very clear IP ownership strategy prior to

engaging suppliers in NPD projects (see table 7.0). One interviewee suggests the use of

supplier conferences and workshops during the early product development stages can help

address the IP ownership issue: “Key to a lot of overcoming IP problems later on is, when we

initially launch programmes, is getting workshops, suppliers sessions, set up specifically to

be clear on who owns foreground IP, what the background IP is, what the strategy is moving

forward. You know, the strategy might be to patent. The strategy might be to publish. It’s

actually being very clear early on what the overall intellectual property strategy is moving

forward”.

------------------------------------------


--------------------------------------------

Three interviewees stressed that if a collaborative relationship were in place then IP could be

shared. Another interviewee stressed the importance of being clear on what part of the

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technology or process is important to the case company and only protecting that: “Owning IP

is if you like, a sledgehammer to crack a nut. There are many other ways that you can utilise

IP without necessarily owning it. Now, whether that’s a royalty-free license, whether it be

that you have IP or a supplier has IP that they agree only to use with [the case company] in a

particular market segment but they’re free to do it in medical where we’re not competing

…so you need to break it down in to its constituent parts and say ‘what are the bits that we

really want to focus on?

Suggestions were given by one supplier interviewee on ways that the case company could

better approach the IP ownership issue. He suggests balancing the case company’s desire to

have executable choice against the suppliers desire to keep what they create through having

licensing mechanisms within the supplier contract: I think when it comes to very specific

designs, then clearly we have to understand what is critical for [the case company] to retain

in their IP… If we come up with a bespoke way of building something which is part of our

background IP, that’s where the licensing would take place. if that [IP] then is shared with

another company, then we should get some future benefit.

5. Discussion

Four themes emerged as barriers to the involvement of suppliers in product stewardship

and clean technology strategies; technological uncertainty, a cost minimization approach to

sustainability, supplier relationships and intellectual property. Technological uncertainty was

found to affect whether the firm developed the technology in-house or in the supply chain.

When technological uncertainty was low, as with titanium aluminide, the technology was

developed in-house with informal supplier input (white-box involvement). When moderate

degrees were present, as in the case of carbon composites, the case company formed a

collaborative joint venture to benefit from the supplier’s knowledge and expertise (“grey

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box” involvement). When technological uncertainty was high, the case company put even

more reliance on the supply chain to develop the technology, particularly relying on small

start-up firms with existing capabilities in ALM (“black box“ involvement). The novelty of

ALM to the aerospace industry also meant only one or two suppliers had the capacity and

capabilities to machine components to the specifications required by the case company. This

created greater degrees of technological uncertainty as the case company had one or two

points of failure in the raw material supply chain.

The second barrier to supplier involvement was a cost minimization approach to

sustainability. In the main, interviewees at the case company, supplier and customer saw

sustainability as a cost and compliance exercise as opposed to achieving competitive

advantage. The NRBV suggests competitive advantage can be achieved through competitive

pre-emption that occurs when the firm gains preferred or exclusive access to important but

limited resources (e.g. raw materials, location, productive capacity or customers) (Hart,

1995). A strategy of competitive pre-emption could prove particularly fruitful in the case of

ALM. The case company could look to secure sole access to raw material powders and

machine capacity therefore blocking competitor entry. The NRBV also suggest competitive

advantage can be gained through claiming reputation “space” in terms of corporate

environmental performance (ibid). This means being seen by customer’s and end users as a

brand of choice for the environment and using this brand image as a selling tool to secure

new business.

Interestingly, several interviewees in customer facing positions highlighted how airlines and

airframe customers were moving sustainability up the agenda and would expect the case

company to demonstrate environmental performance improvements in its wider supply chain

The case company’s recent focus on designing products for the environment including whole

life analysis and extended component life could help in securing new business. The carbon

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composite case was particularly telling in that it showed how supplier involvement right at

the design stage could drive product stewardship strategies forward. Improved strategic

support through the nomination of the “top 11” technologies was also found to be a

significant enabler of advancing the development of all three projects. This shows that with a

strategic vision in place companies can drive the development of technologies that improve

environmental performance.

The third barrier to emerge was the nature of the supplier relationships. Several interviewees

felt that supplier relationships needed to be more collaborative and that suppliers only tended

to be involved in NPD projects after a product specification was in place. In fact, a focus

group member said the case company tended toward white box or black box supplier

involvement with few supplier grey box relationships. Yet, the example of the carbon

composites joint venture showed that grey box relationships were possible and even

desirable. Furthermore, this project showed that early supplier involvement in product

stewardship strategies allowed the knowledge and expertise of the supplier to spill-over to the

case company speeding up development times and reducing technological uncertainty. The

recent introduction of a supplier collaboration manager tasked with improving supplier

relationships also showed promise. Moreover, supplier interviews highlighted how

technology champions and integrated project teams both improved relationships and drove

technology development forward. The case company, having recognized the importance of

supplier collaboration, seemed well placed to see improvements in future product stewardship

and clean technology development programmes

The fourth theme to emerge as a barrier was intellectual property sharing. One focus group

member stated that his firms desire to own foreground IP stopped several supplier agreements

from even getting off the ground. Yet, other interviewees felt if collaborative supplier

relationships were in place then IP could be shared. Importantly, these interviewees stressed

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the case company had to be clear early in the project what IP was strategically important and

only look to own that aspect. They explained that often the supplier and the case company

had different strategic priorities for IP and conflicts were unnecessarily created by the case

company’s desire to own all foreground IP.

5.1 Managerial Decision Matrix

During the research project the author and members of the project’s steering committee

developed a matrix to help managers decide which type of supplier relationship to pursue

when embarking on pollution prevention, product stewardship or clean technology strategies.

The matrix is designed to provide managers with a more strategic approach to sustainability.

It suggests that different types of supplier relationships are required depending on the degree

of technological uncertainty and the supplier’s environmental design and development

capabilities (see the x and y axis). For example, the matrix suggests that if the supplier has a

sustainability strategy in place, a strong ability to manage the environmental performance of

sub-tier suppliers and is committed to reducing waste during design and manufacture then a

“black box” supplier relationship should be pursued. In this instance the supplier would take

responsibility for the majority of technology development and the buyer would only own the

IP that it deems strategically important. In contrast, if the supplier does not have a

sustainability strategy in place, does not proactively manage sub-tier suppliers and has

limited design for environment capabilities than the firm should look for a make-to-print or

white box relationship. It should be stressed however that even white box suppliers should be

compliant with current legislation and not pose a risk to the firm in terms of irresponsible

environmental behaviour. The matrix assumes the decision to outsource technology

development has already been made.

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------------------------------------------

Insert Figure 1 About Here

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6. Conclusion

6.1 Theoretical Implications

Theoretically, the paper explores the role that technological uncertainty plays in product

stewardship and clean technology strategies. The findings suggest that companies will

outsource design and development of new technologies when technological uncertainty is

moderate to high. Specifically, when a company recognizes it lacks the necessary design and

development capabilities in-house it will engage with suppliers to fill this gap in knowledge

and experience. Supplier involvement then seems to be a strategy to mitigate technological

uncertainty when embedding product stewardship and clean technology strategies in the NPD

cycle. Furthermore, the paper makes a contribution to the SI- NPD literature by moving

beyond an understanding of the economic benefits of supplier involvement to understanding

how environmental benefits can be achieved. The paper has stressed the importance of

forming collaborative relationships with strategic suppliers, where intellectual property is

shared, when embarking on product stewardship and clean technology strategies.

6.2 Managerial Implications

In terms of a practical contribution the paper advances a decision making matrix to assist

managers in determining the most appropriate type of supplier relationship to pursue when

utilizing product stewardship and clean technology strategies. The tool is designed to allow

managers to approach environmentally responsible NPD projects more strategically,

recognizing that different types of supplier relationships are appropriate in different types of

situations. The matrix asserts suppliers should only be involved in product design and

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development if they have the requisite knowledge, capabilities and proactive approach to

environmental management. Moreover, the matrix suggests that IP should not be shared in

all instances but only when a collaborative supplier relationship is in place. The paper has

also highlighted some of the key barriers and enablers of involving suppliers in product

stewardship and clean technology strategies. By creating awareness of these factors managers

can isolate and eliminate these barriers in their own operation whilst seeking out the enablers

which smooth the process of supplier involvement,

6.3. Limitations and future research

The research benefited from, but is also limited by, the single case study method. Using a

single case format provided the depth of information needed to study this relatively new and

unexplored area. However, the research is limited in that only the opinions of the case

company employees, its supplier and customer have been collected. Further barriers or

enablers will likely emerge if other companies or industries are studied. This then provides a

fruitful area of future research. Specifically future researchers could investigate if the same or

different factors emerge when study high technology firms in other industries, such as

automotive or electronics. Other research avenues include looking at other triadic

configurations, such as supplier-supplier-buyer triads and how these relationships influence

product stewardship and clean technology strategies. Finally, researchers could look to other

theories for insights into the phenomenon such as stakeholder theory (Freeman, 1984), or the

knowledge based view (Grant, 1996). Stakeholder theory could help researchers understand

the influence of other key stakeholders in product stewardship and clean technology

strategies. The knowledge based view could look at the importance of knowledge exchange

between buyer and supplier during new product development and if this process differs when

developing environmentally responsible technologies.

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TABLE 1

Technological uncertainty and the effect on product stewardship and clean technology strategies

Coded Response # of responses out of 42

Supplier maturity is very low in ALM 3 Knowledge and maturity around ALM is in pockets and enclaves 4 There is a not a well-developed supply chain for ALM machines and powders

10

Limited number of capable powder suppliers creates risk for development of ALM

1

Competition have bought ALM capacity and capabilities 8 Decision to work with Suppliers on carbon composites was due to supplier having more robust capabilities and experience with tech

2

Joint Venture helped pace of Carbon Composite development early on 4

TABLE 2

A Cost Minimization approach to Sustainability as a barrier to embedding product stewardship and clean technology strategies


Cost reduction is the primary driver behind trying to improve environmental performance of new technologies/engines (case company interviewees)

28

Legislation plays an important role in improving environmental performance of new technologies/engines (case company interviewees)

25

Cost reduction is primary driver behind trying to improve environmental performance of new technologies/products (customer interviewee)

3

Legislation is secondary driver of environmental performance improvements (customer interviewee)

1

Cost minimization, legislative adherence and customer attraction are the main drivers of sustainability at supplier (supplier interviewee)

3

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TABLE 3

Supplier relationships as a barrier to embedding product stewardship and clean technology strategies in the NPD process


The case company needs more collaborative relationships with suppliers developing strategically important products

7

Purchasing too focused on finding lowest cost supplier 4 Cost reduction pressures on suppliers inhibits their ability to invest in R&D 2 Not enough resources for developing supplier capabilities for strategic technologies

7

Suppliers are not involved early enough in new technology development (Design stage)

9

Suppliers are involved in development only after technology specification is in place

4

The case company is reluctant to invest in developing capabilities of suppliers of promising new tech

2

The case company is unwilling to commit to longer term spend that suppliers can rely on (case company interviewee)

1

TABLE 4

Intellectual property ownership as a barrier to embedding product stewardship and clean technology strategies in the NPD process


Ownership of IP creates issues in supplier relationships 17 The case company try to own all foreground IP in tech dev. projects with supplier

7

IP ownership creates issues when working with suppliers to develop ALM technologies

5

The supplier case company is unwilling to sign an agreement where the case company owns all forward IP (supplier interviewee)

1

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TABLE 5

Recommendations for taking a more strategic approach to sustainability


The customer’s sustainability agenda plays an important role in improving the environmental performance of new technologies/engines

10

Customer requirements now drive strategy process 9 Competitor activities play an important role in improving the environmental performance of new technologies/engines

7

End of life is now considered during product design 11 Reducing Rare Earths is a concern during the selection of new materials 9 The Supply Chain is now designed with the environment in mind 3 The case company is investing in technologies that prolongs the life of components

3

The case company need to maintain strategic focus on key technologies 17 Increased top level support has sped up development of ALM 3 Increased top level support has sped up development of Carbon composites 1 Integrated Project Teams (IPTs) have sped up rate of technology development

6

Focus given by ALM IPT team has sped up development (supplier interviewee)

1

TABLE 6

Recommendations for improving supplier collaboration on product stewardship and clean technology strategies

Coded Response # of responses out

of 42 The case company now recognizes the importance of being more collaborative with suppliers

5

The case company needs to create a spend for strategically important tech that suppliers can rely on (case company employee)

1

If the supplier had longer term guarantee of business could work with the case company to increase capacity to meet their needs (supplier interviewee)

1

The supplier is now looking at how to assist the case company in optimizing design of new components (supplier interviewee)

1

By consulting on the case company’s design the supplier could challenge established ways of thinking (supplier interviewee)

1

The supplier has the ability to improve environmental performance of technology by being involved in product design (supplier interviewee)

2

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TABLE 7

Recommendations for Intellectual Property Sharing


Need clear IP ownership strategy early on in supplier relationship (case company interviewee)

13

If collaborative relationship in place IP can be owned jointly with suppliers (case company interviewee)

3

The case company need to specify what aspect of technology is strategically important and protect IP accordingly (case company interviewee)

2

The case company needs to recognize there are many ways to utilise IP without necessarily owning it (case company interviewee)

1

IP sharing agreement should balance the case company’s ability to use other suppliers and the supplier’s ability to own what it creates (supplier interviewee)

1

Need licensing mechanism for joint IP if the case company want to share with other supplier so supplier can see future benefit (supplier interviewee)

1

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FIGURE 1

Supplier Involvement in Product Stewardship and Clean Technology Strategies- Decision Matrix

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